Product Reviews: A Benefit, a Burden, or a Trifle? How Seller Reputation Affects the Role of Product Reviews

Abstract

The sales effect of product reviews has been a contentious issue with competing perspectives about when product reviews serve as a benefit, a burden, or a trifle. Unlike previous research that separately investigates the impact of each eWOM system, our study empirically examines the interaction effects of dual eWOM systems, i.e., product reviews and seller reputation. Drawing on reference point theory, we find that seller reputation systems play a reference-point role and determine the efficacy of product reviews. Specifically, negative reviews cause a significant loss in sales for high-reputation sellers but are less detrimental for low-reputation sellers. In contrast, positive reviews can boost sales for low-reputation sellers but are less helpful for high-reputation sellers. These results highlight that seller reputation is a double-edged sword. While a high seller reputation can reduce seller uncertainty and attract more consumers, it may also raise consumers’ expectations and lead to potential negative expectancy violations. Moreover, we explore what strategies may help mitigate the potentially detrimental effect of reference points for high-reputation sellers. Through the lens of restructuring reference points, the reputation reference effect can be adjusted in a more dynamic reputation system (e.g., a reputation badge). Compared to sellers that have never lost their top-rated badge, sellers that have lost their top-rated badge may face an attenuated detrimental impact on sales from the negative expectancy violation due to negative reviews and enjoy a positive impact from positive reviews. We discuss the implications of our findings for both theory and practice.